Till the insertion of major amendments in the Customs (Import of Goods at Concessional Rate of Duty) Rules,2017 [IGCR Rules,2017 in short] by last budgetary changes, the subject rules were simple and plain reading used to make the sense. In Budget 2021 changes, the post import compliances in respect of the importation of many goods under the jumbo exemption Notification No. 50/2017-Cus dated 30.06.2017 have been changed by bringing them under the aegis of IGCR Rules,2017 which warranted to amend the extant set of rules. This amendment majorly hit the compliance in respect of waste paper import and resultant consequences of change in compliance nature has been analyzed by the Author under another article, titled “waste paper import-end use certificate ends” and available via weblink https://taxguru.in/custom-duty/waste-paper-import-end-certificate-ends.html
Having said that bringing more goods under the ambit of IGCR Rules necessitated the infusion of amendments and such were inserted vide Notification No. 09/2021-Customs (NT) dated 01.02.2021. In the process of amending the rules, certain facets still needed clarifications and CBIC has come out with clarifications vide Circular No. 10/2021-Cus dated 17.05.2021 even two and half months later.
In the coming para, these clarifications have been analyzed whether these are clarificatory indeed or bound to create other controversies.
1. 100% OUTSOURCING ON JOB WORK– Rule 6A has been inserted in the IGCR Rules to prescribe the procedure to follow in respect of carrying out job work on the imported goods. The enabling provisions are required to read in the context of the definition of “job work” appended in the rules where job work has been defined in plain words as to any treatment, process or manufacture by a person on goods belonging to the importer. In the definition the scale of treatment, process or manufacture has not been described, thereby in such ambiguity, the clarification as to 100% outsourcing of complete manufacture process on job work to those importers who do not has any manufacturing facility, is commendable and shall eliminate any possibility of dispute.
2. JURISDICTION TO FILE INFORMATION– In para 4.1, it has been clarified that an importer who intends to import goods at a concessional rate of duty shall give a one-time information of goods being imported to the Customs officer under whose jurisdiction, his premises fall. This clarification appears to conflict with the mandate of the rule to file such intend to such Customs officer who has jurisdiction over the premises where imported goods is to be put to use for manufacture or for rendering output service. The reason of confliction is apparent as importer’s premises may not be always the place where imported goods is to be put to use for manufacture of goods or rendering output services as by virtue of allowing job work even entire 100% manufacturing process, the job worker’s place shall be premises where imported goods is put to use for manufacture on job work basis. In such case, the circular is bound to create jurisdiction related issues.
3. OUTSIDE STORAGE– The clarification for outside storage is not found in the rules, thereby it would be very alleviatory to those importers who indulge in bulk import due to various reasons but have space scarcity. Now by going this clarification, they can store the imported goods outside factory (by keeping own control) in premises not owned by him. Though as a matter of compliance he shall be required to ensure to declare detail of such storage place in the one-time information filed initially with the jurisdictional Customs officer as otherwise Customs may come up with the charges of diversion of imported goods having no intent to use such goods in the intended purpose.
4. DIRECT DISPATCH TO JOB WORKER– The set of IGCR Rules lack explicit provision for sending imported goods directly to the job worker premises, para 4.5 in clear terms clarified that the imported goods may be directly sent (from the port of import) to the job worker’s premises.
5. FILING OF INTIMATION FOR SENDING GOODS TO JOB WORKER– The circular regarding filing of intimation for sending goods to the job worker has created confusion in the face of an unambiguous provision contained in rule 6A(1) for intimation filing as a condition precedent for sending goods to job worker by the importer.
The para 4.6 of the Circular suffers by a serious dichotomy in the manner that it talks about sending goods to the job worker after giving an email intimation to the jurisdictional Customs officer but in the same vein, importers have been asked to give such intimation periodically job worker wise, latest by 5th of each month for goods sent for job work in the previous month. The advice of filing intimation on post removal basis cannot be taken as a slip as at one another place para 4.8, it has been mentioned that the challan number and date would also be incorporated in the intimation to be filed. This issue needs immediate clarification from CBIC as otherwise any adverse stand later shall land the importers in trouble for non-compliance.
Though, in case, paradoxical situation in para 4.6 is followed, than the importer is to file two intimations, one before sending goods to job worker and the second one, on post removal basis latest by 5th of each month by reporting previous month dispatch particulars. Thereby it shall be fit case of appending additional compliance by extra-statutory instructions and legal position, needless to say, is well settled in this regard.
6. INTIMATION FILING SUPERFLUOUS- The filing of prior intimation u/r 6A(1) for sending goods to job worker appears superfluous and unpragmatic too, as in terms of rule 4(i), the name and address of job worker is incorporated in filing the information very initially at the time of giving information for opting the IGCR Rules. In case, at the time of opting IGCR Rules facility, the job worker detail is not given as at that point of time it was not intended and not foreseen but later due to change in dynamic business requirement, the need arises to send the goods to job worker, then the question arises whether the filing of intimation u/r 6A(1) would suffice without revising the initial information filed u/r 4(i). This is point which still needs clarification.
7. DUPLICITY IN JOB WORK CHALLAN– Para 4.8 of the circular restated the provisions contained in rule 6A(4) for sending imported goods under cover of the challan, specifying the description and quantity of goods. Here it is worth noting that the IGST is paid on the imported goods, if not exempted, and ITC is claimed by the GST registrant as per their eligibility, thereby the goods imported in IGCR Rules are also subject to the GST provisions where the assessee is required to prepare the delivery challan u/r 55 of the CGST Rules having certain details for sending the goods for job work.
Now a question arises whether challan prescribed under rule 6A(4) of IGCR Rules is independent to the delivery challan prescribed under rule 55 of the CGST Rules. Here the further study reveals that IGCR Rules instead of prescribing any format of the challan, only specify the description and quantity of the goods to be mentioned on the challan which is squarely covered under the contents prescribed for delivery challan under rule 55 of the CGST rules. Therefore, the statutory requirement in two separate rules can be catered by subsuming the contents in one challan by giving the reference of both the rules on the face of the challan.
8. RETURNS ALIGNMENT– The goods imported under IGCR Rules are also subject to the GST provisions, the reason being ITC of IGST paid, is claimed by the eligible registered persons. In such a situation, if such imported goods are sent for job work outside premises than a detail of sending goods (domestically procured and imported as well) to job worker, is furnished in the quarterly return filed in ITC-04 in rule 45(3) of CGST Rules. Per contra, as per the present circular, the importer is also now bound to file periodical intimation latest by 5th of each month by reporting dispatch detail in the previous month.
In the above factual position, it sounds duplicate exercise in the manner to report the same transaction in two different returns which in the technology leverage, such duplicity is easily avoidable in view of the full alignment of GST common portal with the ICEGATE portal of the Customs.
9. JOB WORK PERIOD-In the circular, the maximum six months period for lying goods (input/capital goods) with job worker in terms of rule 6A(5) has been reiterated. The imported goods, even in further semi finished stage, are subject to GST provisions also where one year for inputs and three years period is prescribed under section 143(1)(a) of CGST Act for bringing goods back from the job worker. Thereby same goods is subject to different treatment for the same event as otherwise job working period in both statues can be put on par to remove conundrum and bring uniformity in the compliance having no reason for revenue loss to the Government.
10. UTILISATION OF GOODS IN SIX MONTHS– The manner in which clarification given in para 4.11 in respect of utilization or re-export of imported goods, is certainly bound to raise the interpretational issue because of drafting issue in conjuncting two different provisions contained in sub-rule (1) and (2) of rule 7. As per one possible interpretation, the importers are required to utilize imported goods for intended purpose within six months. In case the Customs takes it literally, the importers shall be in big trouble. Therefore, it is advisable to the stakeholders to approach the CBIC either to withdraw the unintended clarification or modify the same to bring it in consistent with the rules which do not have time line for the utilization in the intended purpose.
11. PAPERLESS AND CONTACTLESS COMPLIANCE– In the circular, it has been throughout advised to file event based intimations via email or store the intimation on the Customs portal in e-sanchit. In this regard, the list of Customs officers in respective commissionerates who are overseeing IGCR Rules, has been provided. In such a manner, it would drastically help in putting in person visits to file intimations on halt.